The weightless U.S. economy

The growth outlook still isn’t looking too bad for the second half, it spite of all the gloomy U.S. data in recent weeks.

The latest Reuters poll of about 250 professional forecasters predicts a mild slowdown for the U.S. and still only a 15 percent chance of a the economy dipping back into recession, even though a good two-thirds of economists have clipped their growth forecasts for second half of the year.

Some of them have chopped their outlook fairly substantially but the consensus is far away from 1-1.5 percent growth some headline-grabbing forecasters have been suggesting.

What’s even more surprising is that the range of forecasts economists have provided is at about the narrowest spread since we started polling on these quarters, implying a greater degree of certainty about the outcome. To the pessimist that means a certain slowdown but an optimist could say this is about as bad as it’s going to get.

The pessimist camp may be getting the upper hand. The Standard & Poor’s 500 index dipped below its 200-day moving average on Tuesday ahead of a Federal Reserve policy meeting that many are speculating will conclude with an announcement of additional stimulus measures to get the economy growing faster.

At this speed, it’s clear the only way the unemployment rate is going to come down substantially is if even more people give up looking for work. The majority of economists polled thought the 10.1 percent unemployment rate in October 2009 was likely the peak but that’s a long way from saying it’s going to fall substantially enough to fuel robust consumer spending growth.

Even more surprising is how steadfast the forecasting community — which it must be said does tend to get the turning points wrong — is clinging on to a resilient euro zone view.

There was no material change to the outlook for growth in the second half and even a slight decline in the probability of a double-dip recession there to 15 percent from 20 percent. That seems to be even more proof that the sovereign debt crisis that raged across Europe just a few months ago has been reduced to a few smouldering embers. Wildfires in Russia and the price of wheat are looking far more dramatic.

This could be the calm before the real recovery — or the next storm. But there is something weightless about it.